Many in the crypto community are still reeling from a catastrophic market event that took place on October 10, 2024. This flash crash led to an astonishing $19.16 billion being liquidated from the market, shattering the values of major cryptocurrencies, including Bitcoin which plummeted from a staggering $120,000. As prices have continued to decrease steadily since that day, a heated debate has emerged among industry leaders regarding the true causes behind the crash.
Star Xu, the CEO of the crypto exchange OKX, offered a stark view on social media, attributing the crash to “irresponsible marketing campaigns.” He specifically criticized USDe, a yield-bearing token from the platform Ethena, suggesting it was treated improperly as a standard stablecoin. Xu emphasized that the event was straightforward and the result of certain companies misguiding users. He claimed that traders were incentivized to convert their stablecoins into USDe for attractive yields, thereafter utilizing the USDe for further borrowing in a potentially dangerous cycle of leverage.
Xu specifically pointed fingers at Binance, arguing that users were welcomed to exchange conventional stablecoins like USDT and USDC for USDe without a proper understanding of the inherent risks. He indicated that this created a “self-reinforcing leverage machine” that deceptively masked the risks involved.
In response, Binance released a comprehensive report disputing Xu’s claims, highlighting that a macroeconomic shock—specifically new tariffs imposed by President Trump on China—was the primary trigger for the crash, coupled with high leverage and dwindling liquidity in the market. The report asserted that the markets had been experiencing pressure prior to the collapse, indicating that traders had taken on significant positions—over $100 billion in open Bitcoin futures and options—leading to widespread exposure and eventual panic as prices began to dip.
Binance reported that as prices fell, market makers implemented automated risk controls, pulling liquidity from the order books and exacerbating the market’s downward momentum. Their analysis indicated that the liquidity on the bid side had nearly evaporated during the peak of the movement, further amplifying selling pressure.
While Binance acknowledged two specific incidents on its platform—an internal slowdown affecting asset transfers and temporary index deviations for several tokens—they emphasized that these issues were not responsible for the overarching market collapse. The exchange revealed it successfully compensated affected users with over $328 million, pointing out that the majority of liquidations occurred prior to the noted index deviations.
Critics, including Haseeb Qureshi of Dragonfly Capital, dismissed Xu’s narrative as oversimplified. Qureshi argued that such a perspective incorrectly sought a single villain for a multifaceted event. He noted that the USDe token experienced price variations exclusively on Binance, while the liquidation spiral unfolded across other exchanges, suggesting broader market dynamics were at play rather than the actions of one exchange.
Other market participants also weighed in, echoing similar sentiments. Seraphim Czecker, the former head of growth at Ethena Labs, highlighted that excessive leverage in the market, coupled with macroeconomic news, revealed a lack of sustainable demand for certain cryptocurrencies.
The spat has also turned personal, with tensions flaring between executives. Former Binance CEO “CZ” pointed out Qureshi’s ties to Dragonfly’s investment history with OKX and voiced skepticism regarding Xu’s claims.
As the dust continues to settle, the crypto industry finds itself in a state of discord over the underlying factors of the crash, underscoring a significant lack of consensus on how to interpret and learn from one of the most substantial liquidation events in its history.
